Bloomberg News

Romania May Delay Share Sales This Year, IMF Mission Chief Says

February 07, 2012

Feb. 6 (Bloomberg) -- Romania may delay the sale of shares in a few state owned companies this year because the high number of approvals needed from authorities means it is taking longer than anticipated, Jeffrey Franks, the International Monetary Fund mission chief to the country said.

The Balkan nation, which failed to sell a minority stake in OMV Petrom SA in July because of market turmoil, will also try to sell interests in other companies before reviving the Petrom sale, Franks said in an interview in Bucharest today.

“There have been a couple of cases where the reforms are not going as quickly as anticipated and we will have to move some companies further down the list of privatization,” Franks said. “It’s not a question of lack of committment. We always knew that the agenda for reforms of state-owned companies is extremely ambitious and there will be some delays.”

Franks declined to name those companies affected.

Romania, which secured a 5 billion-euro ($6.5 billion) precautionary accord from the IMF and the European Union, pledged to sell 15 percent holdings in power-grid operator Transelectrica SA and natural gas companies Transgaz SA and Romgaz SA this year as well as majority stakes in chemicals producer Oltchim SA and mining company Cupru Min SA.

It will also seek to sell 10 percent of hydro-power generator Hidroelectrica SA and nuclear-power operator Nuclearelectrica SA this year.

Budget Deficit

The government plans to use the money it gets from the sales to fund infrastructure investments as it aims to narrow the country’s budget deficit to 1.9 percent of gross domestic product this year from 4.4 percent last year.

Franks also said that the international banks, which own about 90 percent of the Romanian banking system, haven’t reduced exposure to the country compared with the level in March 2009, when a so called Vienna Initiative agreement was signed with the banks to prevent a credit shortage. Erste Group Bank AG, Unicredit SpA and Raiffeisen Bank International AG, are among the nine banks that signed the Vienna accord.

“We essentially see no sign of aggregate deleveraging in the system,” Franks said. “There are some individual banks that are deleveraging but there are other banks that are bringing in more money.”

The European Banking Authority told banks in October to increase their core reserves to 9 percent of risk-weighted assets by the end of June as part of measures introduced to respond to the euro area’s fiscal woes.

The new capital and liquidity requirements for the western lenders controlling three-quarters of eastern Europe’s banking system threaten to curb credit needed to fund the region’s companies and households.

--With assistance from Irina Savu in Bucharest. Editors: Tim Farrand, Elizabeth Konstantinova

To contact the reporter on this story: Andra Timu in Bucharest at atimu@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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